China's Alibaba.com Limited is to pay 540 million yuan (79.06 million U.S. dollars) for a controlling stake in China Civilink (Cayman), which operates in China as HiChina Web Solutions, Alibaba announced on Monday.
According to the purchase agreement, Alibaba will acquire HiChina for cash in two phases, said a statement on the Alibaba.com website. The first phase will see Alibaba acquire 85 percent of HiChina for a cash consideration of 435.42 million yuan (63.75 million U.S. dollars).
The additional 14.67 percent retained by the founders of HiChina could be sold to Alibaba for an additional 104.56 million yuan (15.31 million U.S. dollars) dependent upon HiChina reaching certain performance targets, according to the agreement terms.
HiChina, founded in 1996, is devoted to providing comprehensive Internet infrastructure services to enterprises, covering domain and hosting services, enterprise e-mail systems, website building and e-commerce consultation.
The deal is the largest-yet investment by Alibaba, a global leader in business-to-business e-commerce. It was founded in 1999 in east China's Hangzhou City.
Alibaba will get the large customer base, new applications, automated "do it yourself" website construction technology and management and operating team of HiChina, according to the terms of the agreement.
The investment is expected to be completed by the end of 2009. HiChina will keep its brand and independent operation. HiChina's products and services will be part of Alibaba.com's Information Technology Business Unit, which is focused on small businesses.
"HiChina is an Internet company that has great profitability and healthy financial conditions," said Wu Wei, Alibaba's chief financial officer. "Both sides thought the price of the deal was within a rational range."
The investment will make the most of the advantages of Alibaba and HiChina in their own fields and provide more comprehensive and better products and services to China's small businesses, he said.
The takeover would not involve lay offs of HiChina employees because it did not involve a merger or restructuring, said Zhang Xiangdong, founder and president of HiChina.